WINNER MEDICAL GROUP INC. 2006 EQUITY INCENTIVE PLAN As amended and restated effective October 7, 2007 ARTICLE 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
1.1Purpose. The purposes of this 2006 Equity Incentive Plan are (a) to enable the Company, and the Company?s subsidiaries and affiliates, to attract and retain highly qualified personnel who will contribute to the success of the Company, including the Company?s subsidiaries and certain affiliates, and (b) to provide incentives to participants in this 2006 Equity Incentive Plan that are linked directly to increases in stockholder value which will therefore inure to the benefit of all stockholders of the Company. 1.2Definitions. For purposes of this Plan, except as otherwise defined in this Plan, capitalized terms shall have the meanings assigned to them in this Section 1.2. ?Administrator? means the Board, any Committees or such delegates as shall be administering the Plan in accordance with Section 2 of the Plan. ?Affiliate? means any entity or person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, another entity, where ?control? (including the terms ?controlled by? and ?under common control with?) means the possession, directly or indirectly, of the power to cause the direction of the management and policies of the entity, whether through the ownership of voting securities, by contract or otherwise. ?Applicable Law? means the requirements relating to the administration of stock option and stock award plans under U.S. federal and state laws, any stock exchange or quotation system on which the Company has listed or submitted for quotation the Common Stock to the extent provided under the terms of the Company's agreement with such exchange or quotation system and, with respect to Awards subject to the laws of any foreign jurisdiction where Awards are, or will be, granted under the Plan, the laws of such jurisdiction. ?Associated Award? shall have the meaning assigned to the term in Section 8.2. ?Award? means any award granted under the Plan. ?Award Agreement? means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Award. ?Board? means the Board of Directors of the Company. ?Cause? means (i) the commission of any act by the Participant of a theft, embezzlement or fraud involving the Company or any Parent, Subsidiary or Affiliate of the Company or otherwise, (ii) the Participant?s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of the Company or an Affiliate (including, without limitation, the Participant?s improper use or disclosure of confidential or proprietary information), (iii) Participant?s breach of fiduciary duty to the Company or any Parent, Subsidiary or Affiliate of the Company, or (iv) any intentional act by the Participant which has a material detrimental effect on the Company or an Affiliate?s reputation or business. An Award Agreement or any employment agreement with an Eligible Recipient may further define the term ?Cause? with respect to any Award granted under the Plan to such Eligible Recipient.
?Change in Control? shall be deemed to occur when any of the following events first occurs: (a)the sale, lease conveyance or other disposition of all or substantially all of the Company?s assets to any ?person? (as such term is used in Section 13(d) of the Exchange Act), entity or group of persons acting in concert; (b)any person who is not currently a stockholder of the Company (or does not currently have the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants, options or otherwise, securities of the Company) becoming the ?beneficial owner? (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company?s then outstanding voting securities; (c)members of the Incumbent Board ceasing to constitute a majority of the Board without the approval of the remaining members of the Incumbent Board; or (d)any merger, consolidation or other transaction of the Company with or into any other corporation, entity or person other than a transaction in which the holders of at least 50% of the shares of capital stock of the Company outstanding immediately prior thereto continue to hold (either by voting securities remaining outstanding or by their being converted into the voting securities of the surviving entity or its controlling entity) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity (or its controlling entity) outstanding immediately after such transaction. ?Code? means the United States Internal Revenue Code of 1986, as amended from time to time, or any successor thereto. ?Committee? means the compensation committee of the Board or any other committee which the Board may appoint to administer the Plan. To the extent necessary and desirable, the Committee shall be composed entirely of individuals who meet the qualifications referred to in Section 162(m) of the Code, Rule 16b-3 under the Exchange Act and the applicable rules of Nasdaq, any stock exchange or automated quotation system on which the Common Stock is primarily quoted or listed. If at any time or to any extent the Committee shall not administer the Plan, then the functions of the Committee as specified in the Plan shall be exercised by the Board. ?Common Stock? means the common stock, with a par value $0.001 per share as of the date of adoption of the Plan by the Board, of the Company. ?Company? means Winner Medical Group Inc., a Nevada corporation, or any successor corporation. ?Control? shall have the meaning assigned to the term in the definition of Affiliate in this Section 1.2. ?Disability? means the inability of a Participant to perform substantially his or her duties and responsibilities to the Company or to any Parent, Subsidiary or Affiliate by reason of a physical or mental disability or infirmity for a continuous period of six months, as determined by the Administrator. The date of such Disability shall be the last day of such six-month period or the date on which the Participant submits such medical evidence, satisfactory to the Company, that the Participant has a physical or mental disability or infirmity that will likely prevent the Participant from performing the Participant?s work duties for a continuous period of six months or longer, as the case may be. An Award Agreement or any employment agreement with an Eligible Recipient may further define the term ?Disability? with respect to any Award granted under the Plan to such Eligible Recipient. ?Eligible Recipient? means an officer, director, employee, consultant or advisor of the Company or of any Parent, Subsidiary or Affiliate. For purposes of the Plan, the term ?employee? shall include all those individuals whose service with or for the Company and/or any Parent, Subsidiary or Affiliate of the Company, is within the definition of ?employee? in the ?Rule as to the Use of Form S-8? contained in the General Instructions for the registration statement on Form S-8 promulgated by the Securities and Exchange Commission.
?Employee Director? means any director of the Company who is also an employee of the Company or of any Parent, Subsidiary or Affiliate. ?Exchange Act? means the United States Securities Exchange Act of 1934, as amended from time to time. ?Exercise Price? means the per share price at which a holder of an Award may purchase the Shares issuable upon exercise of such Award. ?Fair Market Value? as of a particular date shall mean the fair market value of a share of Common Stock as determined by the Administrator in good faith through reasonable application of a reasonable valuation method; provided, however, that Fair Market Value shall mean (i) if the Common Stock is listed or admitted to trade on a national securities exchange, the closing price of the Common Stock, as published in The Wall Street Journal, of the principal national securities exchange on which the Common Stock is so listed or admitted to trade, on such date, or, if there is no trading of the Common Stock on such date, then the closing price of the Common Stock as quoted on the next preceding date on which there was trading in such shares; (ii) if the Common Stock is not listed or admitted to trade on a national securities exchange but is listed and quoted on Nasdaq, the last sale price for the Common Stock on such date as reported by Nasdaq, or, if there is no reported trading of the Common Stock on such date, then the last sale price for the Common Stock on the next preceding date on which there was trading in the Common Stock; (iii) if the Common Stock is not listed or admitted to trade on a national securities exchange and is not listed and quoted on Nasdaq, the last sale price, or, if a last sale price is not quoted, the mean between the closing bid and asked prices for the Common Stock on such date, in either case, as furnished by NASD; (iv) if the Common Stock is not listed or admitted to trade on a national securities exchange, not listed and quoted on Nasdaq and the last sale price and closing bid and asked prices are not furnished by the NASD, the last sale price, or, if a last sale price is not quoted, the mean between the closing bid and asked prices for the Common Stock on such date, in either case, as furnished by the Pink Sheets, or similar organization; (v) if the stock is not listed or admitted to trade on a national securities exchange, not listed and quoted on Nasdaq and if the last sale price and bid and asked prices for the Common Stock are not furnished by the NASD, Pink Sheets or a similar organization, the value established in good faith by the Administrator in good faith through reasonable application of a reasonable valuation method; and (vi) in the case of a Limited Stock Appreciation Right, the Fair Market Value of a share of Common Stock shall be the ?Change in Control Price? (as defined in the Award Agreement evidencing such Limited Stock Appreciation Right) of a share of Common Stock as of the date of exercise. Notwithstanding the foregoing, Fair Market Value must in all instances be determined in accordance with Section 409A of the Code. ?Family Member? means, with respect to any Participant, any of the following: (a)such Participant?s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, including any such person with such relationship to the Participant by adoption; (b)any person (other than a tenant or employee) sharing such Participant?s household; (c)a trust in which the persons identified in clauses (a) and (b) above have more than fifty percent of the beneficial interest; (d)a foundation in which the persons identified in clauses (a) and (b) above or the Participant control the management of assets; or
(e)any other entity in which the persons identified in clauses (a) and (b) above or the Participant own more than fifty percent of the voting interest. ?Incentive Stock Option? means any Option intended to be designated as an ?incentive stock option? within the meaning of Section 422 of the Code. ?Incumbent Board? means (i) all individuals serving on the Board on the date of the initial adoption of the Plan by the Board of Directors, to the extent that they continue to serve as members of the Board, and (ii) all individuals who become members of the Board after the date of the initial adoption of this Plan by the Board of Directors, if such individuals? election or nomination for election as directors was approved by a vote of at least a majority of the Board prior to such election, to the extent they continue to serve as members of the Board. ?Limited Stock Appreciation Right? means a Stock Appreciation Right that can be exercised only in the event of a ?Change in Control? (as defined in the Award Agreement evidencing such Limited Stock Appreciation Right). ?Maximum Value? shall have the meaning assigned to the term in Section 8.2. ?NASD? means the National Association of Securities Dealers, Inc. ?Nasdaq? means The Nasdaq Stock Market, Inc. ?Non-Employee Director? means a director of the Company who is not an employee of the Company or of any Parent, Subsidiary or Affiliate. ?Non-Qualified Stock Option? means any Option that is not an Incentive Stock Option, including, but not limited to, any Option that provides (as of the time such Option is granted) that it will not be treated as an Incentive Stock Option. ?Option? means an option to purchase Shares granted pursuant to Article 5 of the Plan. ?Parent? means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations in the chain (other than the Company) owns stock possessing 50% or more of the combined voting power of all classes of stock in one of the other corporations in the chain. ?Participant? means any Eligible Recipient selected by the Administrator, pursuant to the Administrator?s authority hereunder, to receive grants of Options, Stock Appreciation Rights, Limited Stock Appreciation Rights, awards of Restricted Stock, Performance Shares, other types of awards, or any combination of the foregoing, or any person (including any estate) to whom an Award has been assigned or transferred as permitted hereunder.
?Performance Goal? means the goals determined by the Administrator, in its discretion, to be applicable to a Participant with respect to an Award. As determined by the Administrator, the Performance Goals applicable to an Award may provide for a targeted level or levels of achievement which may be based on such measure or measures of performance, which may include, but need not be limited to, performance of the Participant, the Company, one or more Subsidiary, Parent or Affiliate of the Company, or one or more divisions or units thereof, or any combination of the foregoing. The Performance Goals may differ from Participant to Participant and from Award to Award. Any criteria used may be measured in absolute terms or relative to industry or other indices, or a combination thereof. Such Performance Goals shall be based on one or more of the following criteria: (i) earnings; (ii) earnings per share; (iii) earnings growth; (iv) return on assets; (v) return on equity; (vi) revenue; (vii) profits; (viii) profit growth; (ix) profit-related return ratios; (x) cost management; (xi) dividend payout ratios; (xii) market share; (xiii) economic value added; (xiv) cash flow; (xv) total shareholder return; (xvi) book value; (xvii) stock price return; (xviii) price earnings ratio; and (xix) operating income. The Administrator shall have the authority to make equitable adjustments to the Performance Goals in recognition of unusual or non-recurring events affecting the Company, or any Parent, Subsidiary or Affiliate of the Company, or the financial statements of the Company, or any Parent, Subsidiary or Affiliate of the Company, in response to changes in Applicable Law, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles; provided, however, that (i) to the extent required for compliance with the exclusion from the limitation on deductibility of compensation under Section 162(m) of the Code, no adjustment shall be made that would result in an increase in the compensation of any Participant whose compensation is subject to the limitation on deductibility under Section 162(m) of the Code for the applicable year; and (ii) any adjustment either shall not cause Section 409A of the Code to apply to an Award for which such section is not intended to apply or shall not cause an Award which is subject to Section 409A to fail to comply with Section 409A of the Code. The Administrator also may adjust the Performance Goals and measurements applicable to Awards and thereby reduce the amount to be received by any Participant pursuant to such Awards if and to the extent that the Administrator deems it appropriate.
?Performance Grant? shall have the meaning assigned to the term in Section 8.1. ?Performance Grant Actual Value? shall have the meaning assigned to the term in Section 8.1. ?Performance Grant Award Period? shall have the meaning assigned to the term in Section 8.3. ?Performance Shares? means Shares that are subject to restrictions based upon the attainment of specified performance objectives granted pursuant to Article 8. ?Permitted Transfer? means, as authorized by the Plan and the Administrator, with respect to an interest in a Non-Qualified Stock Option, any transfer effected by the Participant during the Participant?s lifetime of an interest in such Non-Qualified Stock Option but only such transfers which are by gift or pursuant to domestic relations orders. A permitted transfer does not include any transfer for value and neither transfers under a domestic relations order in settlement of marital property rights or to an entity in which more than 50% of the voting interests are owned by Family Members or the Participant in exchange for an interest in that entity are deemed transfers for value. ?Pink Sheets? means Pink Sheets, LLC. ?Plan? means this 2006 Equity Incentive Plan, as amended from time to time. ?Related Employment? means the employment or performance of services by an individual for an employer that is neither the Company, any Parent, Subsidiary nor Affiliate, provided that (i) such employment or performance of services is undertaken by the individual at the request of the Company or any Parent, Subsidiary or Affiliate, (ii) immediately prior to undertaking such employment or performance of services, the individual was employed by or performing services for the Company or any Parent, Subsidiary or Affiliate or was engaged in Related Employment, and (iii) such employment or performance of services is in the best interests of the Company and is recognized by the Administrator, as Related Employment. The death or Disability of an individual during a period of Related Employment shall be treated, for purposes of this Plan, as if the death or onset of Disability had occurred while the individual was employed by or performing services for the Company or a Parent, Subsidiary or Affiliate. ?Restricted Stock? means Shares subject to certain restrictions granted pursuant to Article 7. ?Restriction Period? means the period of time Restricted Stock or any other Award remains subject to restrictions imposed on the Award. Such restrictions may be based on continuous service, the achievement of Performance Goals, the occurrence of other events as determined by the Administrator, or a combination thereof. ?Rule 16b-3? shall have the meaning assigned to the term in Section 2.1.
?Securities Act? means the United States Securities Act of 1933, as amended from time to time. ?Shares? means shares of Common Stock reserved for issuance under or issued pursuant to the Plan, as adjusted pursuant to Article 4, and any successor security. ?Stock Appreciation Right? means the right pursuant to an Award granted under Article 6 to receive an amount equal to the excess, if any, of (i) the Fair Market Value, as of the date such Stock Appreciation Right or portion thereof is surrendered, of the Shares covered by such right or such portion thereof, over (ii) the aggregate exercise price of such right or such portion thereof as established by the Administrator at the time of the grant of such Award (or such other exercise price thereafter established by the Administrator with the consent of the Participant granted such Award where required by the Plan). ?Stock Bonus? means an Award granted pursuant to Article 9. ?Subsidiary? means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations (other than the last corporation) in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. ?Ten Percent Stockholder? shall have the meaning assigned to the term in Section 5.4. ?Termination? or ?Terminated? means, for purposes of the Plan with respect to a Participant, that such Participant has for any reason ceased to provide services as an employee, officer, director, consultant, independent contractor, or advisor to the Company or any Parent, Subsidiary or Affiliate of the Company. A Participant will not be deemed to have ceased to provide services in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Administrator, provided, that such leave is for a period of not more than three months, unless reemployment or reinstatement upon the expiration of such leave is provided by contract or statute. In the case of any Participant on an approved leave of absence, the Administrator may make such provisions respecting suspension of vesting of any Award previously granted to such Participant while such Participant is on leave from the Company or any Parent, Subsidiary or Affiliate of the Company as the Administrator may deem appropriate, except that in no event may an Option be exercised after the expiration of the term set forth in the Award Agreement with respect to such Option. The Administrator will have sole discretion to determine (i) the effect upon an Award of any change in the Participant?s status from an employee to a consultant, director, consultant or advisor and (ii)whether a Participant has ceased to provide services and the applicable Termination Date. ?Termination Date? means the effective date of Termination, as determined by the Administrator. ARTICLE 2. ADMINISTRATION.
2.1Administration in Accordance with the Code and Exchange Act. The Plan shall be administered in accordance with the requirements of Section 162(m) of the Code (but only to the extent necessary and desirable to maintain qualification of Awards under the Plan under Section 162(m) of the Code) and, to the extent applicable, Rule 16b-3 under the Exchange Act (?Rule 16b-3?) or the rules of the Nasdaq, any stock exchange or automated quotation system on which the Common Stock is primarily quoted or listed, by the Board or, at the Board?s sole discretion, by the Committee, which shall be appointed by the Board, and which shall serve at the pleasure of the Board. 2.2Other Administration. The Board or a Committee may delegate to an authorized officer or officers of the Company the power to approve Awards to persons eligible to receive Awards under the Plan who are not (A) subject to Section 16 of the Exchange Act or (B) at the time of such approval, ?covered employees? under Section 162(m) of the Code or (C) any other executive officer.
2.3Administrator?s Powers. Subject to the general purposes, terms and conditions of this Plan, the Administrator will have full power to implement and carry out this Plan. The Administrator will have the authority to: (a)construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan (including sub-plans and Plan addenda); (b)prescribe, amend and rescind rules and regulations relating to this Plan (including rules and regulations relating to sub-plans and Plan addenda) or any Award; (c)select persons to receive Awards; (d)determine the form. terms and conditions, not inconsistent with the terms of the Plan, of Awards. Such terms and conditions include, but are not limited to, the exercise and/or purchase price (if applicable), the time or times when an Award may be exercised (which may or may not be based on performance criteria), the vesting schedule, any vesting and/or exercisability acceleration or waiver of forfeiture restrictions, the acceptable forms of consideration, the term, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine and may be established at the time an Award is granted or thereafter; (e)determine the number of Shares or other consideration subject to Awards; (f)determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or any other incentive or compensation plan of the Company or any Parent, Subsidiary or Affiliate of the Company; (g)grant waivers of Plan or Award conditions; (h)determine the vesting, exercisability and payment of Awards, including any vesting and/or exercisability acceleration; (i)correct any defect, supply any omission or reconcile any inconsistency in the Plan, any Award or any Award Agreement; (j)make any adjustments necessary or desirable as a result of the granting of an Award to an Eligible Recipient located outside the United States; (k)determine whether an Award has been earned; (l)to modify or amend each Award, including, but not limited to, the acceleration of vesting and/or exercisability, provided, however, that any such amendment is subject to Section 14 of the Plan and except as set forth in that Section may not impair any outstanding Award unless agreed to in writing by the Participant; (m)to authorize conversion or substitution under the Plan of any or all stock options, stock appreciation rights or other stock awards held by service providers of an entity acquired by the Company (the ?Conversion Awards?). Any conversion or substitution shall be effective as of the close of the merger, acquisition or other transaction. The Conversion Awards may be Nonstatutory Stock Options or Incentive Stock Options, as determined by the Administrator, with respect to options granted by the acquired entity; provided, however, that with respect to the conversion of stock appreciation rights in the acquired entity, the Conversion Awards shall be Nonstatutory Stock Options. Unless otherwise determined by the Administrator at the time of conversion or substitution, all Conversion Awards shall have the same terms and conditions as Awards generally granted by the Company under the Plan; and
(n)make all other determinations necessary or advisable for the administration of the Plan. 2.4Administrator?s Discretion Final. Any determination made by the Administrator with respect to any Award will be made in the Administrator?s sole discretion at the time of grant of the Award or, unless in contravention of any express term of the Plan or Award, at any later time, and such determination will be final and binding on the Company and on all persons having an interest in any Award under the Plan. 2.5Administrator?s Method of Acting; Liability. The Administrator may act only by a majority of its members then in office, except that the members thereof may authorize any one or more of their members or any officer of the Company to execute and deliver documents or to take any other ministerial action on behalf of the Committee with respect to Awards made or to be made to Eligible Recipients. No member of the Administrator and no officer of the Company shall be liable for anything done or omitted to be done by such member or officer, by any other member of the Administrator or by any officer of the Company in connection with the performance of duties under the Plan, except for such member?s or officer?s own willful misconduct or as expressly provided by law. ARTICLE 3. PARTICIPATION.
3.1Affiliates. If a Parent, Subsidiary or Affiliate of the Company wishes to participate in the Plan and its participation shall have been approved by the Board, the board of directors or other governing body of the Parent, Subsidiary or Affiliate, as the case may be, shall adopt a resolution in form and substance satisfactory to the Administrator authorizing participation by the Parent, Subsidiary or Affiliate in the Plan. A Parent, Subsidiary or Affiliate participating in the Plan may cease to be a participating company at any time by action of the Board or by action of the board of directors or other governing body of such Parent, Subsidiary or Affiliate, which latter action shall be effective not earlier than the date of delivery to the Secretary of the Company of a certified copy of a resolution of the Parent, Subsidiary or Affiliate?s board of directors or other governing body taking such action. If the participation in the Plan of a Parent, Subsidiary or Affiliate shall terminate, such termination shall not relieve the Parent, Subsidiary or Affiliate of any obligations theretofore incurred by the Parent, Subsidiary or Affiliate, except as may be approved by the Administrator. 3.2Participants. Incentive Stock Options may only be granted to employees within the meaning of Section 422 of the Code and the regulations thereunder (including officers and directors who are also employees) of the Company, or any Parent or Subsidiary of the Company. All other Awards may be granted to employees, officers, directors, consultants, independent contractors and advisors of the Company or any Parent, Subsidiary or Affiliate of the Company; provided, that such consultants, contractors and advisors render bona fide services to the Company or such Parent, Subsidiary or Affiliate of the Company not in connection with the offer and sale of securities in a capital-raising transaction. An Eligible Recipient may be granted more than one Award under the Plan. ARTICLE 4. AWARDS UNDER THE PLAN.
4.1Types of Awards. Awards under the Plan may include, but need not be limited to, one or more of the following types, either alone or in any combination thereof: (a)Options; (b)Stock Appreciation Rights; (c)Restricted Stock; (d)Performance Grants; (e)Stock Bonuses; and
(f)any other type of Award deemed by the Committee to be consistent with the purposes of the Plan (including, but not limited to, Awards of, or options or similar rights granted with respect to, unbundled stock units or components thereof, and Awards to be made to participants who are foreign nationals or are employed or performing services outside the United States). The Administrator may only award or grant those Awards that either comply with the applicable requirements of Section 409A of the Code, or do not result in the deferral of compensation within the meaning of Section 409A of the Code. 4.2Number of Shares Available Under the Plan. Subject to Section 4.4, the total number of Shares reserved and available for grant and issuance pursuant to the Plan will be 5,000,000. To the extent that any Award payable in Shares is forfeited, canceled, returned to the Company for failure to satisfy vesting requirements or upon the occurrence of other forfeiture events, or otherwise terminates without payment being made thereunder, the Shares covered by such Award will no longer be charged against the foregoing 5,000,000 Share maximum limitation and may again be made subject to Award(s) under the Plan. Shares may consist, in whole or in part, of authorized and unissued shares or treasury shares. The number of Shares which are transferred to the Company by a Participant to pay the exercise or purchase price of an Award will be subtracted from the number of Shares issued with respect to such Award for the purpose of counting Shares used under the Plan. Shares withheld to pay withholding taxes in connection with the exercise or repayment of an Award will be counted as used under the Plan. In addition, shares covered by an Award which is settled in cash will not be counted as used under the Plan. 4.3Reservation of Shares. At all times, the Company shall reserve and keep available a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding Options granted under the Plan and all other outstanding but unexercised Awards granted under the Plan. 4.4Adjustment in Number of Shares Available Under the Plan. In the event that the number of outstanding shares of Common Stock is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, then (a) the number of Shares reserved for issuance under the Plan, (b) the number of Shares that may be granted pursuant to the Plan, and (c) the Exercise Prices of and number of Shares subject to outstanding Options and other Awards, will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws; provided, however, that, upon occurrence of such an event, fractions of a Share will not be issued upon exercise of an Award but will, upon such exercise, either be replaced by a cash payment equal to the Fair Market Value of such fraction of a Share on the effective date of such an event or will be rounded down to the nearest whole Share, as determined by the Administrator. Notwithstanding the foregoing, (i) with respect to Incentive Stock Options, any such adjustment pursuant to this Section 4.4 shall be made in a manner so as to not constitute a ?modification? within the meaning of Section 424(h) of the Code and the regulations thereunder; and (ii) any adjustment either shall not cause Section 409A of the Code to apply to an Award for which such section is not intended to apply or shall not cause an Award which is subject to Section 409A to fail to comply with Section 409A of the Code. 4.5Rights with Respect to Common Shares and Other Securities. (a)Unless otherwise determined by the Administrator, a Participant to whom an Award of Restricted Stock has been made (and any person succeeding to such Participant?s rights with respect to such Award pursuant to the Plan) shall have, after issuance of a certificate or copy thereof for the number of Shares so awarded and prior to the expiration of the Restriction Period or the earlier repurchase of such Shares as provided in the Plan or Award Agreement with respect to such Award of Restricted Stock, ownership of such Shares, including the right to vote the same and to receive dividends or other distributions made or paid with respect to such Shares (provided that such Shares, and any new, additional or different shares, or other securities or property of the Company, or other forms of consideration which the Participant may be entitled to receive with respect to such Shares as a result of a stock split, stock dividend or any other change in the corporate or capital structure of the Company, shall be subject to the restrictions of the Plan as determined by the Administrator), subject, however, to the options, restrictions and limitations imposed thereon pursuant to the Plan. Notwithstanding the foregoing, unless otherwise determined by the Administrator, a Participant with whom an Award Agreement is made to issue Shares in the future shall have no rights as a stockholder with respect to Shares related to such Award Agreement until a stock certificate evidencing such Shares is issued to such Participant.
(b)Unless otherwise determined by the Administrator, a Participant to whom a grant of Stock Options, Stock Appreciation Rights, Performance Grants or any other Award is made (and any person succeeding to such Participant?s rights pursuant to the Plan) shall have no rights as a stockholder with respect to any Shares or as a holder with respect to other securities, if any, issuable pursuant to any such Award until the date a stock certificate evidencing such Shares or other instrument of ownership, if any, is issued to such Participant. Except as provided in Section 4.4, no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities, other property or other forms of consideration, or any combination thereof) for which the record date is prior to the date such stock certificate or other instrument of ownership, if any, is issued. 4.6Limits on Awards Under the Plan. (a)Subject to adjustment as provided in Section 4.4, not more than an aggregate of 5,000,000 Shares may be issued under the Plan as Incentive Stock Options. (b)Subject to adjustment as provided in Section 4.4, the maximum number of shares of Common Stock with respect to which Options, Stock Appreciation Rights, or Limited Rights, or a combination thereof, may be granted during any calendar year to any individual Participant shall be 1,500,000, and the maximum number of Shares with respect to which Restricted Stock may be granted during any calendar year to any individual Participant shall be 1,500,000. These limitations shall be applied and construed consistently with Section 162(m) of the Code. (c)Subject to adjustment as provided in Section 4.4, the maximum number of shares of Common Stock with respect to which Performance Grants may be granted during any calendar year to any individual Participant shall be 1,500,000. This limit shall be applied and construed consistently with Section 162(m) of the Code. (d)The maximum dollar value of Performance Grants that may be awarded during any calendar year to any individual Participant shall be equal to the value of 1,500,000 shares determined as of the first business day of the year of grant. This limit shall be applied and construed consistently with Section 162(m) of the Code. ARTICLE 5. STOCK OPTIONS.
5.1Grant; Determination of Type of Option. The Administrator may grant one or more Options to an Eligible Recipient and will determine (a) whether each such Option will be an Incentive Stock Option or a Non-Qualified Stock Option, (b) the number of Shares subject to each such Option, (c) the Exercise Price of each such Option, (d) the period during which each such Option may be exercised, and (e) all other terms and conditions of each such Option, subject to the terms and conditions of this Article 5. The Administrator may grant an Option either alone or in conjunction with Stock Appreciation Rights, Performance Grants or other Awards, either at the time of grant or by amendment thereafter.
5.2Form of Option Award Agreement. Each Option granted under the Plan will be evidenced by an Award Agreement which will expressly identify the Option as an Incentive Stock Option or a Non-Qualified Stock Option, and will be in such form and contain such provisions (which need not be the same for each Participant or Option) as the Administrator may from time to time approve, and which will comply with and be subject to the terms and conditions of the Plan. 5.3Date of Grant. The date of grant of an Option will be the date on which the Administrator makes the determination to grant such Option, unless otherwise specified by the Administrator. 5.4Exercise Period. Each Option shall be exercisable within the times or upon the occurrence of one or more events determined by the Administrator and set forth in the Award Agreement governing such Option; provided, however, that no Option will be exercisable after the expiration of ten years from the date the Option is granted; and provided, further, however, that no Incentive Stock Option granted to a person who directly or by attribution owns more than 10% of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary of the Company (each, a ?Ten Percent Stockholder?) will be exercisable after the expiration of five years from the date such Incentive Stock Option is granted. The Administrator also may provide for an Option to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Administrator determines. Unless otherwise determined by the Administrator, an Option shall be exercisable as follows: (a)up to 25% of the number of Shares subject to such Option commencing on the first anniversary of the date of grant of such Option; (b)up to an additional 25% of the number of Shares subject to such Option commencing on the second anniversary of the date of grant of such Option; (c)up to an additional 25% of the number of Shares subject to such Option commencing on the third anniversary of the date of grant of such Option; and (d)up to an additional 25% of the number of Shares subject to such Option commencing on the fourth anniversary of the date of grant of such Option. 5.5Exercise Price. The Exercise Price of an Option will be determined by the Administrator when the Option is granted and may be not less than 100% of the per share Fair Market Value of the Shares subject to such Option on the date of grant of such Option; provided, however, that the Exercise Price of any Incentive Stock Option granted to a Ten Percent Stockholder will not be less than 110% of the per share Fair Market Value of such Shares on the date of such grant. Payment for the Shares purchased shall be made in accordance with Article 10 of the Plan. 5.6Method of Exercise. An Option may be exercised only by delivery to the Company of an irrevocable written exercise notice (a) identifying the Option being exercised, (b) stating the number of Shares being purchased, (c) providing any other matters required by the Award Agreement with respect to such Option, and (d) containing such representations and agreements regarding Participant?s investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with Applicable Law. Such exercise notice shall be accompanied by payment in full of the Exercise Price for the number of Shares being purchased in accordance with Article 10 and the executed Award Agreement with respect to such Option. 5.7Termination. Unless otherwise provided in an Award Agreement, exercise of Options shall be subject to the following: (a)If the Participant is Terminated for any reason except death or Disability, then the Participant may exercise each of such Participant?s Options (i) only to the extent that such Options would have been exercisable on the Termination Date and (ii) no later than three months after the Termination Date, but in any event, no later than the original expiration date of such Option;
(b)If the Participant is Terminated because of Participant?s death or Disability (or the Participant dies within three months after a Termination other than for Cause or because of Participant?s Disability), then each of such Participant?s Options (i) may be exercised only to the extent that such Option would have been exercisable by Participant on the Termination Date and (ii) must be exercised by Participant (or Participant?s legal representative or authorized assignee) no later than twelve months after the Termination Date, but in any event no later than the original expiration date of such Option. (c)Notwithstanding the provisions in paragraphs 5.7(a) and 5.7(b), if a Participant is terminated for Cause, neither the Participant, the Participant?s estate nor such other person who may then hold an Option shall be entitled to exercise such Option whatsoever, whether or not, after the Termination Date, the Participant may receive payment from the Company or any Parent, Subsidiary or Affiliate of the Company for vacation pay, for services rendered prior to the Termination Date, for services rendered for the day on which Termination occurs, for salary in lieu of notice, for severance or for any other benefits; provided, however, in making such a determination, the Administrator shall give the Participant an opportunity to present to the Administrator evidence on Participant?s behalf that the provisions of this paragraph 5.7(c) should not apply and, in the alternative, paragraph 5.7(a) or 5.7(b) shall apply; provided, further, however, that, for the purpose of this paragraph 5.7(c), Termination shall be deemed to occur on the date when the Company dispatches notice or advice to the Participant that such Participant is Terminated. 5.8Limitations on Exercise. The Administrator may specify a reasonable minimum number of Shares that may be purchased on any exercise of an Option, provided, that such minimum number will not prevent Participant from exercising the Option for the full number of Shares for which the Option is then exercisable. 5.9Limitations on Incentive Stock Options. The aggregate Fair Market Value (as determined as of the date of grant) of Shares with respect to which an Incentive Stock Option are exercisable for the first time by a Participant during any calendar year (under the Plan or under any other incentive stock option plan of the Company, and any Parent, Subsidiary and Affiliate of the Company) will not exceed $100,000. This $100,000 limitation shall be applied by taking Options into account in the order in which granted. An Incentive Stock Option shall be deemed to be a NonQualified Stock Option to the extent that the foregoing $100,000 limitation is exceeded. In the event that the Code or the regulations promulgated thereunder are amended after the effective date of the Plan to provide for a different limit on the Fair Market Value of Shares permitted to be subject to Incentive Stock Options, such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment. 5.10Modification, Extension or Renewal. The Administrator may modify, extend or renew any outstanding Option and authorize the grant of one or more new Options in substitution therefor; provided that (i) any such action may not, without the written consent of a Participant, impair any of such Participant?s rights under any Option previously granted; and (ii) the Administrator shall consider the impact of Section 409A of the Code on any such modification, extension, renewal, or substitution. Any outstanding Incentive Stock Option that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) and other applicable provisions of the Code. 5.11No Disqualification. Notwithstanding any other provision in the Plan, no term of the Plan relating to an Incentive Stock Option will be interpreted, amended or altered, nor will any discretion or authority granted under the Plan be exercised, so as to disqualify the Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any Incentive Stock Option under Section 422 of the Code. 5.12Prohibition Against Transfer. No Option may be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent and distribution or pursuant to a domestic relations order, and a Participant?s Option shall be exercisable during such Participant?s lifetime only by such Participant or such person receiving such Option pursuant to a domestic relations order.